Best in Energy – 15 March 2022

China struggles with massive coronavirus outbreak

Europe is key destination for Russia energy exports

Europe oil deliveries via pipeline from Russia ($FT)

U.S./China talks about Ukraine (China view) (trans.)

U.S./China talks about Ukraine (U.S. perspective)

LME’s nickel contract failed under pressure

Nickel trading to resume under standstill agreement

Russia oil likely to be sold on shadow market ($BBG)

China’s traders sold LNG into Europe market ($BBG)*

* Europe’s summer gas futures prices moved to a huge premium of €72 per MWh compared with winter 2023, encouraging opportunistic sales by China’s traders into what was a very hot market.

HEDGE FUNDS and other money managers held short positions in NYMEX WTI equivalent to just 25 million barrels on March 8, one of the smallest short positions in recent years, as the persistent surge in prices and the threatened interruption of Russian oil exports forced most holders to close them out. Short-covering likely amplified upward pressure on prices, especially for near-dated futures contracts, where most hedge fund positions are concentrated, which would also have intensified the backwardation. But with short positions reduced close to historic lows, the conditions are in place for a new short-selling cycle when the extreme upside risk to prices is reduced:

NORTHWEST EUROPE’s temperatures have moved above the long-term seasonal average again over the last week, reducing heating demand and gas consumption, and helping make the post-winter inventory level look more comfortable. So far this winter, cumulative heating demand at Frankfurt in Germany has been -10% below the seasonal average, significantly easing the pressure on gas inventories:

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Published by

John Kemp

Energy analyst, public policy specialist, amateur historian